He was the “banker”. • Nationalization of Imperial Bank of India in 1955, with extensive banking facilities on a large scale especially in rural and semi-urban areas. With respect to trust accounts, not only the actual notice but even constructive notice would suffice to hold banks liable as a trustee. Before he dies, he adds spouse as cosigner to bank account so now it's "john smith and mary smith atf john smith rlt, dec 7, 1941" After john's death, wife claims it's a joint account, moves money to personal account, refuses to distribute any to kid. However, in the cases where a bank is acting as a trustee and it puts the trust funds on deposit with itself, the terms of the charging clause in the trust instrument may be such which exclude the bank from having to account to the beneficiaries, for profit from employing the trust money in its business.[xxiii]. There are records from Greece, Rome, Egypt, and Ancient Babylon that suggest temples loaned money out, in addition to keeping it safe. HSBC established itself in Bengal in 1869. The apparent and most obvious benefit that one derives by impleading the bank liable as a trustee is of separation of funds from the general assets of a bank so as to claim preferential right in the event of bankruptcy. The declaration should also set out the fee that the bank charges for acting as trustee. Whether the bank is under any duty to obtain regular flow of information from board and whether bank is entitled to set-off profit from one speculative investment against loss in another. That responsibility may no doubt be extended in equity to others who are not properly trustees if they are found either making themselves de son tort or actually participating in any fraudulent conduct of the trustee…but on the other hand strangers are not be held made constructive trustees merely because they act as agents of trustees in transactions within their legal powers…unless those agents receive and become chargeable with some part of the trust property or unless they assist with knowledge in a dishonest and fraudulent design on the part of the trustees…”[xxi]. All rights reserved. Share on Google+. Justice Shah speaking for the Supreme Court held that after the purpose for which the money was entrusted was carried out, in the absence of the further instructions, the defendant did not cease to be a trustee. So basically, this paper seeks to examine the circumstances under which a bank may be held liable as a trustee. The premium may be taken from either capital or income. Due to failure on account of unwise loans, to rule and organize, a stable banking system arose. [ix]At this juncture it is important to note that the above-mentioned observation does not suggest that bank should assume the role of a detective. [vi] When such word occurs in the name of the account, the bank obviously has the notice of the fact of the existence of the trust. The person who conducted this ‘lending’ activity was known as the “Banker” because of the bench he usually set. When a bank serves as the trustee, it will administer and distribute the assets (and any related income) according to the trustor’s wishes, as outlined in the trust agreement. [v]Halsbury’s Laws of England, Vol.3(1), para 155. Modern commercial bank beside performing the main functions that are accepting deposit and lending money covers a wild range of financial and non-financial services to the customers and the general public. A trustee is a person who takes responsibility for managing money or assets that have been set aside in a trust for the benefit of someone else. The fact that most temples were also the financial centers of their cities and this is the major reason that they were ransacked during wars. It was held in the case of Bartlett v. Barclays Bank Trust Co Ltd[xxii]that a professional corporate trustee, such as a bank, owed a higher duty of care and was liable for loss caused to a trust by neglect to exercise the special care and expertise that it professed to possess. Copyright 2021 Leaf Group Ltd. / Leaf Group Media, All Rights Reserved. Bank is an Agent, Trustee, Executor, Administrator for Customers. E. B. Havell in his work: The History of Aryas Rule in India says that Muhammad Tughlaq issued copper coin as counters and by an imperial decree made them pass at the value of gold and silver. As per Section 6 of the Banking Regulation Act, banks can perform the functions of a trustee with a higher standard of care than what normally exists for others. A bank may have more experience managing property and would be more likely to manage the trust’s assets impartially and professionally. The Industrial Credit and Investment Corporation of India Limited (ICICI) was incorporated at the initiative of World Bank, the Government of India and representatives of Indian industry, with the objective of creating a development financial institution for providing medium-term and long-term project financing to Indian businesses. You can include almost any type of asset, including tangible and intangible assets, in the trust account. But as soon as the bill is collected it then depends upon the facts of each case whether, with regard to the proceeds, the bank is a trustee or a debtor. The customer is the beneficiary so the ownership remains with the customer. This resulted in greater involvement of the state in different segments of the economy including banking and finance. Gradually as the personal possession got evaluated in term of money, in form of coins made of precious metal like gold and silver, these were being deposited in the temple treasuries. Ammembal Subbarao Pai founded “Canara Bank Hindu Permanent Fund” in1906. Numerous people, like priests or temple workers, were both devout and honest, always occupied the temples, adding a sense of security. [i]http://www.kkhsou.in/main/EVidya2/commerce/banker_customer.html. Property law and the process for transferring property between parties, varies by state. Trade guilds acted as bankers, both receiving deposits and issuing loans. The bank, therefore, in such cases cannot discharge its obligation with respect to the trust property by giving an account of the credit balance. However, the Sultan’s tokens were not accepted in counties in which his decree did not run. The fee a bank charges to serve as trustee is normally a percentage of the value of the assets in the trust. The downside of using a bank as a trustee is that it charges a fee for its service. John Cromwell specializes in financial, legal and small business issues. Who is a trustee? • Reserve Bank of India Scheduled Banks’ Regulations, 1951. This being the primary trust and since this was no longer possible, it reverted to the respondent according to a secondary or resulting trust to that effect. Company suffered substantial losses due to hazardous investment in property development. In fact, many people need financial support from the Bank to fulfill the financial requirement. How did the concept emerge? Tariff of charges for personal accounts [PDF, 389KB] Fee Information Document - Barclays Bank Account [PDF, 355KB] Important information. Foreign banks too started to arrive, particularly in Calcutta, in the 1860s. The respondents pursuant to this made a loan for the amount for the payment of dividend and the cheque was paid into a special account with B bank that was created specifically for this purpose. All forms of money were a unit of value and promised to pay the bearer of specified value. The position would have been different if the appellant had given instructions to the Bank to the effect that after the bills were collected the Bank should either keep this money for him or should pay them to someone else or do something definite or specific with regard to these proceeds. It must be remembered that mere entrustment of money to the bank does not make the bank trustee. A number of banks established then have survived to the present such as Bank of India, Corporation Bank, Indian Bank, Bank of Baroda, Canara Bank and Central Bank of India. I'm not sure whether you've tried or have a relationship with Handelsbanken or UBS (or any other banking providers) but they might be able to help too. A bank generally charges 0.75 percent to 3 percent of the total asset value. The beneficiary could be a child, an adult that lacks capacity to manage their own affairs or an institution, and the funds held in trust could be to pay for a child’s education, to fund a house deposit or to make grants available to a local community. When as last the copper tankas had become more worthless than clods, the Sultan in a rage repealed his edict and proclaimed that the treasury would exchange a gold coin for his copper ones. A money economy existed in India since the days of Buddha. Custodians and Trustees In a trust account, the bank acts as a custodian of the account while the trustee has legal control over the account's assets. As a general rule, trustee if earns a profit by using the trust funds, it has to account for it. As a trustee, you must use the money or assets in the trust only for the beneficiary’s benefit. These were aimed to provide banking coverage to all section of the society and every sector of the economy. and Pandu Rajar Dhibi (Bengal). Over a period of time following are the various circumstances under which the banks has been fastened with the liability of the trustee. Later after several years chairman came up with the proposal of investing the available private company funds for development projects but the proposal was not linked to the proposed public quotation which the bank had earlier said that it would give favourable consideration. To prove that banker was liable as trustee, plaintiffs have to show the existence of those facts which can dispel the general presumption of the debtor-creditor relationship. The question that arose for determination, in that case, was whether the bank was a trustee for that amount or whether the relationship was that of mere creditor and debtor. A trustee savings account is an account where money is held in trust on behalf of a beneficiary. The bank trust account is used mostly to control assets on behalf of a third-party owner. The first banks were The General Bank of India, which started in 1786, and Bank of Hindustan, which started in 1790; both are now defunct. There were many professional bankers and moneylenders like the Sethi, the word literally means “chief”. Indigenous banking grew up in the form of rural money lending with certain individuals using their private funds for this purpose. In the case of the Official Liquidator v. N Chandranarayan[iii], it was held that the following factors shall be crucial in determining as to whether the presumption of the creditor-debtor stands rebutted or not. A trust account is a business bank account used by a public accountant to hold funds on behalf of clients. If the money is entrusted with the bank for a special purpose until the fulfillment of the same the funds remain with the bank in its capacity as a trustee. If the customer deposits securities or valuables with the banker for safe custody, banker becomes a trustee of his customer. Here the entire amount from the ‘trust account’ was transferred into the personal account in the same bank. The Swadeshi movement inspired local businessmen and political leaders to found banks for the Indian community. The fee a bank charges to serve as trustee is normally a percentage of the value of the assets in the trust. Recently iron coins were found in very early levels at Attranji Kheri(U.P.) For example, it allows a trustee to control what happens with the assets of an estate. A bank that charges higher fees may provide additional services, such as tax preparation. In dealing with trust accounts the bank also has to ensure that the trustees’ act within the scope of their power. Check your state’s laws for the proper process for transferring assets into the trust. The bank knowledge of the trust account … For instance: A trustee holds property for the beneficiary, and the profit earned from this property belongs to the beneficiary. [iv]A Arora, “The Bank’s Liability As A Constructive Trustee”, Journal of Business Laws, 1990, 217, p.218. • Nationalization of SBI subsidiaries in 1959. While delivering the judgement the Hon’ble court placed reliance upon an English decision in which a person advanced money to a bankrupt for settling the claims with his creditors. Many banks offer trust services under their Wealth Management or Private Bank departments. ESCROW ACCOUNT 2.1 Escrow Bank to act as trustee. The origin of the word “rupee” is found in the Sanskrit rūpya “shaped; stamped, impressed; coin” and also from the Sanskrit word “rupa” meaning silver. It was also noted here that the trust and debt relationship could co-exist and the existence of one was not an impediment to the other. This merely indicates that the bank can not wilfully shut its eyes to blatant breach of trust. In estate administrations you come across pay-on-death “POD” bank accounts and in-trust-for or “ITF” bank accounts (also known as Totten trusts) all the time. The trustee can be one individual, multiple individuals, an institution (a bank or trust company) or a combination of an institution and one or more individuals. It was explained by the court that the underlying principle for such a conclusion is that the banker to the issue collects the money from the subscribers as an agent of the company and holds the money in a fiduciary capacity. [xxi]A Arora, “The Bank’s Liability As A Constructive Trustee”, Journal of Business Laws, 1990, 217, p.220. It also throws light on living style, political and cultural aspects of civilized mankind. Similarly in the case of Valaja Govinda Saravanabavananthan  v. The Exchange Bank of India and Africa Ltd[xix] It was held that when the bills were collected, in as much as the appellant had given no instructions to the Bank as to what should be done with those proceeds, the Bank became entitled to use these proceeds for its ordinary business. The presidency banks dominated banking in India but there were also some exchange banks and a number of Indian joint stock banks. Your question is ambiguous. Negotiate with the bank regarding the fees it will charge to be trustee. Fromhold Jaffe & Adams: Bank as a Trustee of My Trust? On these lines of reasoning, on the facts beforehand it was held that the Bank became the debtor of the appellant as soon as the bills were realized. As soon as we open an account in a bank or the banker issue a draft or we deposit our valuables in a bank, a relationship is created with the bank at that moment. Trustee account - definition of trustee account by The Free Dictionary. But in the absence of any instructions the function of the Bank as an agent for the collection came to an end when the bills were collected, and the sale proceeds not being impressed with any trust the Bank became entitled to use those sale proceeds for its ordinary business. The story of Indian coinage itself is very vast and fascinating and also throws tremendous light on the various aspects of life during different periods. The primary concern of these agency houses was trade, but they branched out into banking as aside line to facilitate the operations of their main business. The next was the Punjab National Bank, established in Lahore in 1895, which has survived to the present and is now one of the largest banks in India. Here, the fact that bank purported to open a fixed deposit account, in the name of the plaintiff was held to be inconsequential as it was done without the consent of the plaintiff. Later on, in the year 1993, the government merged New Bank of India with Punjab National Bank. The standardization of currency unit as Rupee in largely due to Sher Shah in 1542. The case Thomson v. Clydesdale Bank Ltd,[xi]illustrates the same. Another case of considerable importance that the court had relied upon was that of the New Bank of India v. Pearey Lal. One really clear example is setting up a Trust Fund for a child: the assets are deposited in a Trustee Bank Account, and the person named as Trustee is then responsible for managing the money until the child reaches an agreed-upon age. Noteworthy are the observations made by Lord Selborne which are chanted by every scholar confronting this subject as a sacred text, “those who create a trust cloth the trustee with legal power and control over the trust property, imposing on him a corresponding liability. It is also observed that the term ‘bankrupt’ got evolved then as the irate depositors broke the bench and table of the insolvent banker. The fervor of Swadeshi movement led to establishing of many private banks in Dakshina Kannada and Udupi district which were unified earlier and known by the name South Canara (South Kanara )district. Such mediating agencies gave birth to the concept of “banks” and “banking”. It was observed by the court that had the money been paid into Nagercoil Branch account, the bank’s position would not have been that of the agent and it would have been entitled to control and use of the money, which in turn would have given the official liquidators the right to use the money to pay creditors. Finding a bank which will open a trustee account is getting harder and this is where the traditional banking relationships come in so any solicitor connections you have should be able to offer you some help here too. It was observed by Mellish LJ that ‘if an account is in plain terms headed in such a way that banker can not fail to know it to be a trust account, the balance standing to the credit of that account will, on the bankruptcy of that person who kept it belong to the trust’.[viii]. Swadeshi Movement The period between 1906 and 1911, saw the establishment of banks inspired by the Swadeshi movement. Define trustee account. Requirements for opening a trust come from the trust itself and the bank at which you'll be opening the account. Most banks offer trust accounts as an optional service. [xxvi]MANU/MH/0097/1992. This can be said to be continuation of the preceding subsection. How do they transact? Banaji. The trustee of the settlement was a bank and subsequently a trust corporation controlled by the bank. You must also be very confident in your trustees, as each trustee will have individual access to your compensation. This was the principle that was enunciated by House of Lords in the case of Barclays Bank Ltd. v. Quistclose Investments Ltd.[xii]. Skip to main content . Indian joint stock banks were generally undercapitalized and lacked the experience and maturity to compete with the presidency and exchange banks. Small purchases were regularly paid for in cowry shells (varataka), which remained the chief currency of the poor in many parts of India. Central Bank of India was established in 1911 by Sir Sorabji Pochkhanawala and was the first commercial Indian bank completely owned and managed by Indians. However, the standard of care that a bank has to adopt in such cases is higher than that of a standard of ordinary prudence. Negotiate with the bank regarding the fees it will charge to be trustee. Commercial transactions have increased in content and quantity from simple banker to speculative international trading. The vagaries of monarchial rule led to the issues of currency being vested with the banks since they enjoyed faith, controlled credit, and trading. Nationalization of banks in India was an important phenomenon. Banking is today an integral part of our everyday life: At home, at school, at the office, at business, on travel everywhere we counter some aspect of banking. In this article, we’ll explore the birth of this flourishing industry.[ii]. The case of Canara Bank v. NTPC[xxiv]serves as a good illustration where the bank is acting as an agent under s.6 of the Banking Regulation Act. Mere entrustment of money with the bank does not put the bank in a state of the trustee. In dealing with trust accounts the bank also has to ensure that the trustees’ act within the scope of their power. The trustee has the responsibility of managing the account's assets. Within two weeks of the issue of the ordinance, the Parliament passed the Banking Companies (Acquisition and Transfer of Undertaking) Bill, and it received the presidential approval on 9 August 1969. But the plaintiff never gave any instructions for opening any account fixed deposit or otherwise with respect to the amount after they reached Calcutta. Money plays a dominant role in today’s life. Also, research the reputation of the bank’s trust department. How to Choose a Successor Trustee for My Living Trust, How to File a Police Report for an NSF Check. Similarly in the case of the M P Co-operative Bank v. P D Dalal [xv]it was held that when the Bills are handed over to a bank for collection, the Bank is constituted as an agent for their collection after which the relationship between both will depend upon other circumstances. In this case a company was promised loan finance if it first obtained finance from another source to pay a share dividend that had already been declared. Also, the amounts forwarded by the subscribers, under various provisions of Companies Act make the bank a statutory trustee. This was a major change for direction for the private company but the bank representative at the meeting did not raise any objections to it and that the bank has not yet given approval to such a change in investment policy. Investigate the bank options available to you. Personal; Business; About; Service status; Coronavirus (COVID-19) Business accounts. The bank is entitled to use the funds in any manner it deems fit. The banking sector also witnessed the benefits; Government took major steps in this Indian Banking Sector Reform after independence. IBC Suspension: Too Much To Chew On For The Banks? In 1923, it acquired the Tata Industrial Bank. A trust document should be prepared by an attorney. Now this trust had major shareholding in the BTL (private company) and therefore bank as trustee had a controlling interest and duty with regard to the management of company. Requirements to Open Trust Account . In others, it will function basically as a savings account, with very little active management required. No, the balance in the account is not yours. Also, the creator of a trust may want someone with whom he has a personal connection to oversee the trust property. If you are named the trustee, it is for specified purposes as mentioned in a declaration of trust. The trustee will also want to look at how much you had in your bank account at the time of filing your Chapter 7 bankruptcy. Before such transfer bank went into liquidation and the funds remained with the Bombay branch. The practice of depositing personal valuables at these places which were also functioning as the treasuries in ancient Babylon against a receipt was perhaps the earliest form of “Banking”. In Re: Ballantyne v. Nanwa Gold Mines Ltd[xxvii]the question that came for adjudication in relation to the issue under discussion was whether the amount collected from the intending subscribers to the issue in pursuance of the circular issued by the company can also be said to impress with a trust. Draft the Declaration of Trust. The company was held entitled to amount of the cheque. [xxv]RBI v. Bank of Credit and Commerce International Ltd. MANU/MH/0097/1992. The oldest bank in existence in India is the State Bank of India, which originated in the Bank of Calcutta in June 1806, which almost immediately became the Bank of Bengal. Generally speaking, when you are a trustee and both people or the single person has died and you have taken over, your job is to transfer assets into your name now, as the trustee of that trust, so “Jane Smith, as the trustee of the Smith Trust.” However, if the bank under the circumstances cannot be said to have the knowledge of the trust, it can not be held liable. A Trustee Bank Account is basically a way to control assets on behalf of a third party. If the trust owns rental real estate, the trustee would be responsible for managing the property, including dealing with tenants, repairs, insurance and any required inspections. By the 1960s, the Indian banking industry had become an important tool to facilitate the development of the Indian economy. Stock as trustee for bank account Banco in July 1661 for transferring property between parties, varies by state Regulations act 1949... In which his decree did not run moneylenders like the Sethi, nature! 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